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FX Strategists at UOB Group remain bearish on the USD/CNH in the short-term horizon.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘conditions are oversold and any weakness in USD could be limited to a test of 6.4000’. However, USD rebounded strongly from 6.4225 (high of 6.4571). The combination of oversold conditions and waning momentum suggest that the current movement is part of a consolidation phase. For today, USD is likely to trade sideways between 6.4200 and 6.4600.”

Next 1-3 weeks: “While our expectation for USD to weaken was correct, we did not quite anticipate the pace of the decline as it dropped sharply to a low of 6.4127. As highlighted yesterday (05 Jan, spot at 6.4500), the next support is at 6.4300 followed by 6.4000. In view of the vastly improved momentum, a break of 6.4000 would not be surprising and would open up the way for a move lower to 6.3800. All in, USD is expected to remain weak as long as it does not move above 6.4950 (‘strong resistance’ level was at 6.5100 yesterday).”